Organic grocer adopts aggressive pricing strategy

Amazon officially took over Whole Foods Market Monday and the company immediately followed through on its promise to lower prices.

Bloomberg reported that a Whole Foods store in New York City slashed prices, marking down organic rotisserie chicken from $13.99 to $9.99 each and organic fuji apples went from $3.49 per lb. to $1.99 per lb.

It’s unlikely that those foods, sold in Manhattan, were produced on Canadian farms.

But Amazon’s new policy of lower organic prices could impact Canadian farmers because Whole Foods is a major player in the organic trade.

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“The concern, for me (and) from a farmer perspective… is often lower prices at the store level can mean prices being pushed down (for) farmers. That money needs to come from somewhere,” said Marla Carlson, executive director of Sask Organics, which serves organic growers and promotes organic agriculture.

Amazon, the online shopping juggernaut, bought Whole Foods earlier this year for about US $13.7 billion. The grocery chain, specializing in organic and natural foods, has 448 stores in the U.S., 13 in Canada and nine in the United Kingdom.

Cutting prices is core to Whole Foods new strategy.

“By working together with Amazon… we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food,’ said John Mackey, Whole Foods Market chief executive officer, in a statement.

Western Canada is a major producer of organic grains, like wheat and oats. A large share of that production is exported to the U.S. and used to manufacture a long list of organic foods.

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If a major grocer like Whole Foods lowers organic prices, in store and online, prices at the farm gate would logically also fall. But there is a possibility that increased sales at Whole Foods boosts demand for organic commodities and supports on-farm prices.

Increased demand is normally good news, but it could be problematic for North America’s organic industry.

There’s been a shortfall of organic production in Canada and the U.S., particularly of feed grains.

“I know they are coming in (feed grains). I don’t know how much,” said Becky Lipton, executive director of Organic Alberta, in 2016.

A portion, perhaps a large percentage of those imports may come from countries like India, Bulgaria, Romania and China. Those imports became controversial this spring when the Washington Post reported that organic soybeans shipped into the U.S., from Ukraine, weren’t actually organic.

Whole Foods and Amazon may want to dramatically increase organic sales but that might be easier said than done.

Boosting organic production in Canada and the U.S. is more complicated than lowering price tags because the switch to organic production takes three years.

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“I’m not saying they didn’t do their research (but) the idea of doubling production and (the) real understanding of what that is going to take, all the way through the value chain,” Carlson said.

“It’s different in the organic sector…. We do have that shortage of supply.”

Carlson added it’s too early to know what this all means for Canadian organic farmers, but it likely will mean something.

“This (Amazon) is obviously going to increase access to people who haven’t had access to organic food, because (there) isn’t a store in their area that sells it,” she said.

Comments

I was recently commissioned to write a full report on North America’s failing organic industry.

In short, there’s no field testing, $40-billion + worth of “organic” food is mostly imported, there’s more sickness, higher costs and it’s more subsidized.

Kissing optional

What subsidies does an organic producer get that the chemical use producers don’t?
The inputs tax write off (aka welfare for chem companies) takes more tax payer subsidization to the ag sector than any other free ride offered.

Subsidies in the organic industry rarely go to the farmer. They go to the activists.

Harold

You were recently commissioned by whom; you left that part out.
“there’s more sickness”; caused by what identifiable and undeniable cause and are those causes a standard in conventional farming …you left that out. What are the balances between subsidized “conventional” and subsidized “organic”; you left that part out. For someone who has been commissioned to write a FULL report, you have provided just your say so and hearsay.
Do you believe that the word commissioned added value and weight, because for me, it is totally meaningless; in short, I’ve been commissioned to take out the trash. I’ve been commissioned too.
Amazon spends $13.7 billion US in organic and natural foods and you’re going to talk about – “North America’s failing organic industry”; a day late and a dollar short. I think you should save your speech for the Amazon board of directors, who clearly in your opinion, don’t know how to make or invest a dollar; convince them. Amazon sees something in the future that your tired narrative does not.

Why did the Capital Research Center in Washington DC choose you to commission the report?
Who commissioned your report on human health?
Who commissioned your report on finance?
Would the “Organic sector” commission you for a report?
I have a problem with math, and perhaps you can help me. 2+2 = what, and is the answer equally relevant to all? If it is relevant to all, and truth to all, do you need to keep repeating it? If someone has to keep repeating themselves, is it not a lie that they are telling? I’m not seeking to be “educated” by you, (or runaround BS dot com) but I will tell you this; when your language becomes “math language” in clarity, I will sit up and notice. I know that you are locked out of your highest office holding their mandate in your hand, so therefore, I would call you just their foot soldier; others may say money slave. An independent commissions themselves and you fail in your terms to recognize the differences. Moreover, the Capital Research Center creates the wars that they are fighting; my questions will not be answered. As with any BS dot com: they give you the questions that they will allow you to ask and provide only those answers.

Mischa, I’ve read your report. Your report is merely a recap of all of your past opinion pieces all lumped together as one. My previous two comments still stand.

richard

The reason organic food has become the global juggernaut ($100B USD/annum), is because it was self a evident, self directed, self empowering methodology that pre-empted food contamination by glyphosate, neonicotinoids, antibiotics and other xenobiotic substances………long before most of them ever came into popular usage. It has captured the zeitgeist of forward thinking intelligent consumers globally……..and there is nothing the reactionary forces of entropy can do about it…. The necessary disruption at Whole Foods is nothing more than a mid course correction to enforce greater market discipline on a sector that has become a little complacent.

Stephen Daniels

Yes the lowering of prices to farmers for organic products should drive more to conventional farming ,Amazon has it backwards. But of course they can import from countries who call anything organic and the public will buy it just like clothes made by kids in sweat shops

ed

Yes, the organic market is seemingly insatiable presently. Poisons are a bit out of vouge, at least for now.

Stephen Daniels

You and Richard are good at deflecting but neither responded to my comment just went off on your own tangent.Amazon is going to demand lower prices from producers or bring unregulated products from overseas to fill organic demand.This isn’t a good news story for organic farmers.

richard

That’s cause Ed and Richard speak to whats actually happening while Misha and Stephen speak to speculation and innuendo….. The fact that organic growers realize two to five hundred per cent premiums to conventional might suggest there is some wiggle room in pricing dontya think?…… To assume amazon will only press growers in the scope of the food chain is naïve….. they.can and will make everyone smarter….. To jump on the old xenophobic bandwagon of sweatshops and foreign competition is just more fear, loathing and envy….. c’mon Stephen….. you are better than this…. get a helmet!

Stephen Daniels

Too bad you never learned supply and demand economics.In your world does A&W buy all their beef from Canadian producers?The $ incentive has to be great enough to cause producers to switch to organic or in beef hormone free .That 2 to 5 hundred % premium for organic isn’t causing farmers to switch cause that premium is not that enticing for farmers who know the numbers.

richard

Those who “know the numbers” are dependent on twenty three billion dollars USD (USDA) per year subsidies from the taxpayer in order to maintain the illusion of “supply and demand” and “efficiency”……pretty much the same with crop insurance and federal programs in Canada….. I guess that’s the superior knowledge you are referring to …. Funny, I have never heard an organic farmer whining about prices…..

Stephen Daniels

Nice deflection to some imaginary subsidies.Get back to me when A&W is sourcing their beef from Canada you know after efficiencies forced on by A&W cause Canadian producers to produce hormone free beef for less.

richard

Wrong again…..its right on the USDA website…. but we don’t want to let the facts get in the way of agribiz delusions of grandeur…. Its probably lost on you but A&W is not certified organic beef…. on the right track…. but not certified…….So your fear loathing and envy is misplaced….. …

Stephen Daniels

So Amazon can make everybody smarter in production but A&W can’t leastways that’s your words.
Like I said this article is good news for countries with no certification of organic production.Not good news for Canadian producers.

richard

Yeah, I’d like to agree with you Stephen…..but then of course we’d both be wrong…..

Harold

A&W is a corporation that is steered by its bottom line and consumers steer that bottom line. Amazon is also steered by its bottom line in the same way. Amazon is not A&W and A&W is not Amazon. What you don’t know about business and corporations is very telling.

So you agree imports should be banned. If consumers are clued up this would not be needed. They are getting better but ??? Maybe not fast enough, right so like you suggest maybe trade should be restricted or stopped to raise the bar. Good thinking!

richard

That’s a pretty lame analogy…… Its not that organic farmers are paid too much for their product…..its conventional farmers are paid too little. Grain prices in current dollars have been on a steady decline since 1917 (see Les Henry, Grain News)…. The fact that the church tells you to grow more for a hungry world is unadulterated nonsense……. Grow more get less is the mantra for a failed business model……and fear loathing and envy toward those who actually get paid for their efforts…. is pathetic.

Stephen Daniels

This organic scam is really working with consumers.Wonder what consumers would think if they knew the largest organic farmer in Sask has been busy pushing bush and draining wetlands spending millions destroying wildlife areas to grow ‘organic’ grain.Really hilarious what sheeple will believe nowadays like the myth that organic is somehow good for the environment Sure not good for the environment where this organic farmer farms.

Kissing optional

Last time I checked, the chemical industry lobbyists want the politicians to continue subsidizing the farmers’ chemical inputs cost by the actual taxpayer thus making the farmer just the book keeping middle man and conduit to fill the chemical companies coffers with taxpayer money.
Not a single farmer would use the products if they weren’t paid subsidies to do so.
PS
Good dodge on the false claim of “More subsidized”
It makes your plea of ‘read my report’ so much more compelling to do.

Stephen Daniels

But by your logic K.O. organic producers are even more heavily subsidized than no till farmers cause of the vast amounts of fuel they use for tillage and as you would agree the fossil fuel industry is heavily subsidized.

Kissing optional

Both types of farming practices use ‘vast amounts of fuel’ and the chemical production also uses ‘vast amounts’ of fuel and other energy sources to produce those chemicals and to lay the oil industry welfare on the feet of the organic farmer is disingenuous hyperbole and the modern organic farming practices are much less consumptive of fossil fuel than the past practices of farming without chemicals.
All of which I am sure you know but posted your propaganda to perpetuate the chemical use lie.
Your ruse may as well have claimed the ‘Monsanto mantra ‘ we have to feed the world’ pathos.